What Is a “Dually Registered” or a “Dual Hat” Financial Advisor?

BY Genti Cici, March 19, 2021

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What Is a “Dually Registered” or a “Dual Hat” Financial Advisor?

In our commentary about differences between fiduciary vs. suitability standard we described when an advisor serves as a broker (suitability standard) or as a fiduciary advisor (fiduciary standard). A ‘dually registered’ advisor also known as a ‘dual hat’ advisor, this one is registered both as a broker/representative of their firm as well as a fiduciary advisor. Most of the large national financial advisory firms you may know and recognize are registered like this, both as a broker representing their firm as well as a fiduciary putting the client’s interests first. 

As you can potentially notice an advisor that can play both roles, sometimes as a broker and sometimes as a fiduciary advisor has more potential conflicts than an advisor that doesn’t have such both roles. Issues may sometimes arise when either of their roles conflicts with the other. As a broker you represent your firm and look out for the best interest of the firm, but as a fiduciary you’re supposed to look out for the best interests of your client. 

Such advisors can at times be and act as a broker for a client, but be and act as a fiduciary for another client. Sometimes such advisors can be both a broker and then a fiduciary advisor (or vice versa) for the same client, depending on the timing of advice (fiduciary advice) and product selling (as a broker). 

Alternatively, an RIA (Registered Investment Adviser) that is not also registered as a broker is known as ‘fee-only’, is only paid by the client and has no broker obligations to withhold. Such a firm has fewer potential conflicts of interest compared to a dually registered advisor that can ‘switch their hat’ and be a broker or fiduciary advisor at will. Our bias here again, but InvestEd is a ‘fee-only’ fiduciary advisor that ensures our clients’ best interests are in mind with no other affiliations or brokerage company to also make happy. 

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CONTENT CONTRIBUTORS

  • Published by InvestEd
  • Allison Pescatore
    Lead Strategist
  • Genti Cici
    CFP®, CAIA, Advisor
  • Endrit Lloshi
    Advisor

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